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    Coronavirus impact on China’s manufacturing not ‘yet fully manifested’ even factory output cools

    China’s factory activity cooled slightly in January, although officials and analysts warned the drop does not account for the coronavirus outbreak, which is set to test an economy already growing more slowly.

    China’s factory activity cooled slightly in January, although officials and analysts warned the drop does not account for the coronavirus outbreak, which is set to test an economy already growing more slowly.

    The official purchasing managers’ index (PMI) dropped to 50.0, the National Bureau of Statistics (NBS) said on Friday, having remained steady at 50.2 for the last two months of 2019 following a reading of 49.3 in October. But the NBS warned that because the survey was conducted before January 20, “the impact of pneumonia caused by the new coronavirus has not yet (been) fully manifested”.

    “Future trends will need further observation,” it added in a statement.

    The non-manufacturing PMI – a gauge of sentiment in the services and construction sectors – strengthened to 54.1 from 53.5 in December.

    A reading above 50 signals growth in the sector, while a score below 50 indicates a contraction, meaning January’s reading signifies stability, but little expansion. Analysts polled by Reuters had expected the January reading to come in at 50.0.
    “I would disregard today’s release,” said Raymond Yeung, chief economist for Greater China at ANZ. “The figure certainly overrates the economic outlook as it does not reflect the interruption due to the outbreak.”
    China’s economic growth had already slowed to its weakest level in nearly 30 years in 2019 amid the trade war with the United States.
    The potential for improvement had emerged in mid-January as China and the US signed a phase one trade deal, but this was before the outbreak of the coronavirus, which has now claimed more than 200 lives and is set to test an already fragile economy.
    Many factories in China remain shut after the Lunar New Year holiday was extended, and it is unclear when normal business will resume in the world’s second largest economy, with the World Health Organisation declaring the coronavirus outbreak a public health emergency on Thursday, a decision which may amplify the economic risks to China’s economy.
    “The official PMIs show that manufacturing activity weakened and non-manufacturing strengthened in the lead-up to the outbreak of the Coronavirus. The following months’ PMIs will give insight into how damaging the virus is,” said Martin Lynge Rasmussen, China economist at Capital Economics.

    “The PMIs are usually valued as being among the first pieces of data released for an economy each month. But China’s January PMI surveys have been overtaken by subsequent events. The PMI surveys ended on January 20, the same day that Xi Jinping publicly stated that the outbreak was serious.”

    • The official manufacturing purchasing managers’ index (PMI) dropped to 50.0 in January, but the survey was conducted before the Wuhan coronavirus outbreak
    • Officials warned that survey was conducted before January 20, so ‘impact of pneumonia caused by the new coronavirus has not yet (been) fully manifested’

    Source South China Morning Post